Responding to news from the Council of Mortgage Lenders that lenders have contacted interest-only borrowers whose mortgages are due to mature by the end of 2020 and discussed repayment options, Martin Wheatley, chief executive officer at the Financial Conduct Authority, said:
“This forward looking and consumer-at-the heart type of action is a prime example of a model demonstrating good conduct outcomes and putting customers first; it’s good to see that real progress is being made. What I am particularly pleased with is how industry, regulator and consumer have come together to address this problem as one in a collaborative way. It’s too soon to declare success, but these are encouraging findings.
“Everyone needs to keep the momentum going. Our advice for borrowers is unchanged: you must with engage with your lender; this is a shared problem and you need to work together to resolve it.”
Key points:
- There has been a significant reduction in lenders’ interest only back books. Between Q4 2012 to Q4 2013 there has been a 12% drop – compared the same period a year earlier when there was a reduction of less than 2%.
- Lenders have fulfilled their commitment to contact borrowers whose interest-only mortgages mature by 2020. Those who haven’t are those with very small balances where there is little material risk, and those who were already part of an existing lenders’ contact programmes.
- Overall, around 30% of customers contacted have responded so far. Of these, around 80% already had a clear repayment strategy.
- All firms have read the FCA Industry Interest-Only Guidance with three quarters having implemented or rolled out guidance.
- Firms are offering customers a range of options to address the interest only shortfall. Some of these options include: switching to a full repayment mortgage, allowing overpayments to reduce the end-of term balance, and extending the term of the mortgage.
Background
- On the 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA, as well as how it is different to the PRA.
